The Battle for Supply Chains

Peter Lee

The trade frictions triggered by the Russia–Ukraine war between Europe and China are deepening. Distinct from those, the U.S.–China tariff conflict is essentially a battle over supply chains. The U.S. aims not merely to raise tariffs but to repatriate manufacturing or reconfigure global supply chains to reduce single-source reliance on China.

As U.S.–China and China–Europe trade tensions escalate, China faces growing pressures in three main areas: real estate, export-oriented firms, and employment.

In the short term, tariffs could push inflation in the U.S., but recent data show limited pass-through to consumer prices, implying firms on both sides have absorbed some costs. For China, export businesses face immediate headwinds. In the long run, companies may relocate production to the U.S. or nearby countries like Mexico, boosting American manufacturing jobs while eroding China’s export capacity, increasing unemployment, and fragmenting global supply chains—detrimental to China’s long-term development.

The tariff war also harms domestic employment: since China’s WTO accession, foreign investment has underpinned industrial upgrading and created massive job opportunities for graduates. Continued offshoring would worsen youth employment and undermine higher education’s social returns.

Moreover, the trade conflict affects real estate: urbanization and migrant labor demand drove housing demand and price growth. If firms relocate and urban employment falls, housing demand may collapse, triggering wealth loss among homeowners and financial stress for banks.

In short, the tariff fight is fundamentally a contest over industrial and supply-chain control. Its consequences reach far beyond trade statistics—touching urbanization, employment, and everyday livelihoods—making it a structural issue requiring sustained public attention.